Bloomberg News

Euro to Weaken to 10-Week Lows Over Next Year, Wells Fargo Says

The euro may decline to $1.28 in 12
months, the lowest since November, as weak economic growth
erodes optimism in Europe’s 17-nation currency bloc, according
to Wells Fargo & Co. (WFC:US)

The San Francisco-based bank revised its forecast from
$1.24 per euro, saying that the improving bond market in Italy
and Spain and less dovish language from the European Central
Bank put the shared currency on a stronger footing versus the
dollar than previously expected. Still, the euro represents a
selling opportunity, wrote Nick Bennenbroek, head of currency
strategy at Wells Fargo, in a report to clients.

“The continued underperformance of the European economy
would be the main reason that the euro would weaken,”
Bennenbroek said in a telephone interview from New York. “At
some point, you’d expect a step back from positive economic
reports and the ECB moving a little bit more in a dovish
direction.”

The euro dropped 0.9 percent to $1.3513 at 4:32 p.m. in New
York after falling 1 percent, the biggest decline since Jan. 3.
The common currency reached $1.3711 on Feb. 1, the highest level
since Nov. 14, 2011. It last touched $1.28 on Nov. 21.

The ECB, which has held its main refinancing rate at 0.75
percent since July, will make no change at its next policy
decision on Feb. 7, according to the median forecast of 58
economists surveyed by Bloomberg. Central-bank President Mario
Draghi may make more dovish remarks at the meeting without the
central bank altering policy, according to analysts.

The ECB meeting comes as corruption allegations have led to
calls for Spanish Premier Mariano Rajoy to resign and as Italy’s
Silvio Berlusconi narrowed the front-runner’s lead as elections
loom even as he stands trial on charges he paid a minor for sex
and appeals a four-year prison sentence for tax fraud.

Wells Fargo was the second-most accurate foreign-exchange
forecaster, according to data compiled by Bloomberg.

To contact the reporter on this story:
Taylor Tepper in New York at
ttepper2@bloomberg.net

To contact the editor responsible for this story:
Dave Liedtka at
dliedtka@bloomberg.net